Master agency Business Communications Management (BCM) has developed a program wherein it will finance a new agent’s entry into the telecom sales business. Based on early success, BCM’s CEO John Cunningham hopes to extend the program to additional market entrants in 2009.
BCM’s agent financing program has been running on an ad hoc basis for the past four years and has three graduates and two current enrollees, Cunningham said.
“If you are going to start your own [agency] business, you have to plan on not making much money for a year. That’s challenging if you have a family or expenses,” said Cunningham, explaining that most agents don’t get paid on their first sales for six months, but it takes several months of consistent sales to build up a base that generates significant commissions.
What BCM does is work with the prospective agent to arrive at a loan amount that will sustain the agent for the first 12 months he/she is in business. The agent must pay the loan back beginning in month 13 and has until month 60 to do so. The loan is interest-free for the first two years (months one-24).
The loan is tied to sales targets. So if the monthly loan amount is $10,000, the agent must sell an average of $10,000 a month in new business. The average sales number is determined on a rolling three months. So, the average sales for each of the previous three months needs to be $10,000, in this example. If it is, the loan continues in the next month. At month 13, the agent begins to pay back the loan from commissions earned. So, BCM withholds commissions in excess of the monthly loan figure (in this case, $10,000) until the loan is repaid.
However, if the average sales volume is not met, BCM will forgive the deficit and continue the loan for another month. If the deficit continues in the consecutive month, BCM will lower the monthly loan amount. If the deficit continues for a third month, BCM will discontinue the loan and issue repayment terms. Cunningham said, so far, the program has a zero-failure rate.
In addition to meeting the average monthly sales goal, agents also must commit to exclusivity during the loan period and for three years after it’s been repaid. This period ranges from five to eight years, depending on how quickly the loan is repaid. Cunningham said it’s feasible for an agent to repay the loan in year two and that has been the case so far.
Cunningham is quick to add that agents in the financing program do not take a hit on commissions. BCM pays its subagents 70 percent of what it makes in carrier commissions. “We want to pay competitive commissions. We are not expecting them to take a hit on commissions. We are expecting that if we help finance their business for two years interest-free … we want some sort of commitment coming back our way,” said Cunningham.
BCM is not actively marketing the program, but Cunningham said he would be interested in having as many as three agents participating at a time. “So far we have done it with people that we know,” he said. “The risk is that the whole thing is a bust and we are out a significant amount of money. We are not a bank and we are not looking to make money on the interest.”
He said the program isn’t for dabblers, but for those people who are confident in their ability to perform. That’s why there are sales numbers tied to the loan.
While one might think BCM’s acceleration of the program is about capitalizing on the flood of unemployed carrier sales reps and the dearth of credit for entrepreneurs, that would be wrong. “It’s not that we are looking at the economy and saying there are a lot of [carrier] layoffs and now is a good time,” he said, saying that it’s only a matter of expanding what has been proven successful. It’s a program for good salespeople that couldn’t become agents otherwise, he said.
Dominick Callandriello is one such person. His agency, Clover Communications Management LLC, launched in August 2008 with the help of a loan from BCM. In its first six months, Callandriello claimed Clover has exceeded its first-year revenue objectives with more than $120,000 in sales.
Callandriello’s 15-year career has been in enterprise and channel sales and sales management with MCI-WorldCom, Verizon Communications Inc. and AT&T Inc. Most recently he was director of sales and channels selling IT security and managed services at Tekmark Global Solutions LLC. Callandriello joked that he decided to become an agent in 1996, 2004 and again in 2006. What was stopping him? The startup costs. “It takes chutzpah to drop everything you have and take a shot at it,” he said, noting that dropping a steady paycheck to wait a year or more to recover it was not an option for this family man.
Callandriello said becoming an agent is attractive to him because he is able to represent all carriers and architect solutions that are in the best interest of his clients. He decided to take the plunge this year in part because of the opportunity presented in declining carrier support. “[Carriers] are not throwing the resources like they used to at the accounts. It’s just not in the budget for them. The customers are forced now to invest in a consultant or hire full-time employees to manage their communications,” he said, noting this presents an opportunity to become a liaison between the end user and his telecom and IT suppliers, not only understanding vendor offers, but the customer’s environment and, ultimately, offering the end user continuity in account support.
Callandriello finally was able to risk the career move after talking to Cunningham and his partner, Frank Ahearn, about BCM’s financing option. Callandriello knew the BCM folks from his days back in 2004 managing the channel for Verizon Business. BCM also sold Tekmark’s managed IT security services.
But it wasn’t just the money, Callandriello said, about his decision to work with BCM. He noted there were other financing options available to him, but he wanted the support BCM offered for growing his business. “You sign up with BCM and their back office helps support your company as you grow and build it,” he said, noting BCM has nearly 17 years of experience and a staff of more than 70 experts available to support his agency and his customers. “Independently, I am the clutch client manager and I’ve got the account relationships and the technical skills. But proposals, contract and legal support, and customer service, having a Qwest expert on staff, a Verizon expert on staff ― those are things my company out of the gate could not have done. It would cost hundreds of thousands of dollars. You get that as part of the agreement.”